According to the docket, on July 15, 2005, the Court entered the Final Judgment and Order of Dismissal with Prejudice signed by U.S. District Judge Charles R. Breyer. The settlement was approved against Clarent Corporation and certain former directors and officers of Clarent Corporation. The Court further entered the Order approving the Plan of Allocation and the award of attorneys’ fees and reimbursement of expenses. On July 26, 2005, the Court also entered the Final Judgment and Order of Dismissal with Prejudice against Jerry Shaw-Yau Chang.

By the Notice of Pendency and Proposed Partial Settlement of Class Action dated May 13, 2005, the Court will hold a hearing on July 14, 2005, at 10:00 a.m., to decide whether to approve the settlement in the amount of $6.9 million. This $6.9 million is in addition to the $2 million settlement fund paid by or on behalf of other defendants, Cooley Godward LLP, and Deborah Ludewig (the “Cooley Defendants”), for claims on behalf of persons who acquired Clarent common stock between March 29, 2001 and August 31, 2001. A separate notice regarding that settlement was previously sent and the Court approved that settlement on March 25, 2005. In this court case, Ernst & Young LLP (“E&Y”) was also a defendant. On or about February 16, 2005, a jury found E&Y not liable.

The Court in charge of the case is the United States District Court for the Northern District of California, and the case is known as In re Clarent Corporation Securities Litigation, Master File No. C-01-3361 CRB. The institution who sued, Otter Creek Partners, is called the Lead Plaintiff. The following are current or former “Defendants” in the action: Clarent, E&Y, the Cooley Defendants, Jerry Shaw-Yau Chang, Matthew Chiang, Barry Forman, Richard J. Heaps, Michael F. Vargo, and Simon Wong. The settlement applies to all of these defendants except for the Cooley Defendants (which paid $2 million in a separate settlement) and E&Y (which prevailed at trial). This settlement also dismisses actual or potential claims against current and former directors, officers, and employees of Clarent or its subsidiaries, except Matthew Chiang, who are or were insureds under any of certain insurance policies issued to Clarent for the time period relevant to this lawsuit (herein referred to as “Released Persons”).

In a press release dated February 17, 2005, after 4 weeks of trial and 3 days of deliberation by a San Francisco jury in In re Clarent Corporation Securities Litigation, the jury found liability against one of the Individual Defendants, CEO of Clarent, for a knowing omission or misstatement in Clarent's second quarter 2001 10-Q. The jury also found that E&Y made a false statement in connection with Clarent's second quarter 2001 10Q, although it declined to assign liability to E&Y for the misstatement.

By the Notice of Pendency and Proposed Partial Settlement of Class Action dated November 12, 2004, a Settlement Hearing will be held on March 25, 2005, for the purpose of determining: (1) whether the Settlement of the claims against the Cooley Defendants, in the Cooley Action for the sum of approximately $2,000,000 in cash, plus accrued interest, should be approved by the Court as fair, reasonable, and adequate and, therefore, this Cooley Action against the Cooley Defendants should be dismissed with prejudice as set forth in the Stipulation of Settlement dated as of November 11, 2004 (the “Stipulation”); (2) whether the Plan of Allocation is fair and equitable and therefore should be approved; and (3) whether the application of Lead Counsel for the payment of attorneys’ fees, reimbursement of expenses, and interest thereon should be approved.

The original complaint charges Clarent and certain of its officers and directors with violations of the Securities Exchange Act of 1934. On September 4, 2001, Clarent announced in a press release that it had discovered information suggesting that its previously reported revenues for the first and second quarters of fiscal 2001 may have been materially overstated, and that the Company's Board of Directors was forming a special committee to investigate a number of transactions that placed in question the Company's historical financial results. The Company also stated that its first quarter 2001 revenues, as release on April 19, 2001, and its second quarter 2001 revenues, as release on July 19, 2001, will be reduced and the related net losses will increase upon conclusion of the review. In addition, the Company anticipates that its revenues for the second half of fiscal 2001 and for fiscal 2002 will be substantially below previously anticipated levels, and that the related losses will be significantly larger than expected. The Company also announced that several of its officers had been placed on administrative leave. On this news trading halted at $5.37.